🔷 What’s New for Retirement Catch‑Up Contributions in 2026
Two important tax changes are coming in 2026 that may affect how you save for retirement and how your business deducts research and development costs. Below is a clear, easy‑to‑understand walkthrough of what’s changing and how it may impact you.
And as always, if you’d like help planning ahead, JTA‑CPA provides expert tax services, accounting support, and business advisory:
🔷 Changes to Retirement Catch‑Up Contributions in 2026
If you’re age 50 or older, you’ve probably been taking advantage of catch‑up contributions to increase your retirement savings. These rules are getting an update starting in 2026, and if you’re a higher‑income earner, you’ll definitely want to pay attention.
📌 The Basics: How Much You Can Contribute
Beginning in 2026, the standard contribution limit for 401(k), 403(b), and 457(b) plans is $24,500. If you’re 50 or older, you can add an extra $8,000 as a catch‑up contribution, bringing your total to $32,500.
And if you’re between ages 60–63, you’re eligible for an even higher catch‑up limit starting in 2025—up to $11,250, for a total potential contribution of $35,750 in 2026.
If you’d like help determining your ideal contribution strategy, check out our tax planning services:
💼 A Big Shift for Higher‑Income Earners
Here’s where things change:
If your 2025 W‑2 Box 3 wages are more than $150,000, then starting in 2026 all of your catch‑up contributions must be made as Roth contributions, not traditional pretax contributions.
This means:
- You won’t get a tax deduction for catch‑up dollars in 2026
- Those contributions will instead grow tax‑free in retirement
- Your taxable income for 2026 will likely be higher
Some employers may automatically classify your catch‑up dollars as Roth unless you opt out—so keep an eye out for communication from your HR department.
If you want help managing taxable income or phaseout limits, our small business accounting team can support year‑round planning:
https://jta-cpa.com/jackson-titus-and-associates-llc/small-business-accounting-bookkeeping-services/
🧭 What This Means for You
If you’re close to retirement age or regularly make catch‑up contributions, it’s a good time to review your retirement and tax strategy. Moving from pretax to Roth can impact:
- Your tax bracket
- Phaseouts for various credits
- Medicare premium thresholds
- Income‑based deductions
We’re happy to walk through these decisions with you.
🏢 Employer Plan Impact
If your employer did not offer a Roth option:
- They had to add a Roth feature for 2026, or
- Restrict high‑income employees from making catch‑up contributions entirely
Some employers use a “deemed Roth election” for high earners, automatically routing catch‑up dollars into a Roth bucket unless employees opt out of catch‑ups entirely.
⚠️ 2026 Tax Planning Considerations
Because Roth contributions do not reduce taxable income, switching to Roth‑only catch‑ups can:
Increase Your Taxable Income
Higher taxable income may:
- Reduce deduction eligibility
- Trigger phaseouts for credits
- Increase Medicare premium brackets
- Push taxpayers into a higher tax bracket
📘 Example:
If you contributed $8,000 in traditional catch‑up contributions in past years, that amount now becomes taxable. This could affect strategies such as:
- Timing of Roth IRA conversions
- Sale of appreciated assets
- Capital gain harvesting
- Medicare premium brackets
To manage income-based limitations and optimize year‑round tax planning, consider exploring our Tax Section.
🧭 Professional Guidance Is Recommended
🟧 Immediate Deduction for Research & Experimental (R&E) Expenses Returns
Businesses engaged in research or product development received a major tax benefit under the One Big Beautiful Bill Act (OBBBA) signed July 4, 2025.
This law restores the ability to immediately deduct domestic research and experimental (R&E) expenses, reversing a key provision of the TCJA.
🔄 What Changed — And Why It Matters
From 2022–2025, the TCJA required:
- U.S.-based R&E expenses → amortized over 5 years
- Foreign R&E expenses → amortized over 15 years
OBBBA eliminates this rule for tax years beginning in 2025, allowing businesses to expense qualifying U.S. R&E costs immediately.
🧾 What This Means for Your 2025 Tax Return
☑️ Immediate Deduction Returns
All eligible U.S.-based R&E expenses incurred in 2025 can be deducted in full on your 2025 return.
☑️ Retroactive Opportunities for Small Businesses
Small businesses (average annual gross receipts ≤ $31M) may:
- Amend 2022, 2023, and 2024 returns
- Claim immediate deductions for R&E expenses that were previously amortized
- Potentially receive refunds on overpaid taxes
- Deadline: July 4, 2026
This is one of the most favorable small-business tax opportunities in years.
☑️ Acceleration Options for All Businesses
Companies of any size can accelerate deductions for unamortized balances from:
- 2022
- 2023
- 2024
You may:
- Deduct the entire remaining balance on your 2025 return, or
- Elect to split it ratably across 2025 and 2026
This flexibility allows strategic tax planning based on projected income.
🏭 Incentives to Bring R&D Back to the U.S.
Because only domestic R&E qualifies for immediate expensing:
- U.S.-based research becomes far more tax‑advantaged
- Foreign research remains subject to the 15‑year amortization
Companies evaluating where to expand R&D functions should revisit the cost-benefit analysis under the new rules.
💡 Don’t Forget the Research Credit
You may be eligible for the federal research credit in addition to deductions.
Important notes:
- Deduction reduces taxable income
- Credit reduces tax paid directly
- You cannot apply both to the same expense
We help businesses evaluate and document credit-eligible R&E activities.
